- 29 - interest at 10 percent on the unpaid balance of grape purchases by Winery, no interest was accrued for 1987 by Winery with respect to the amounts due Vineyards. Winery's rent payments to Vineyards also ceased during 1986. This was done at the instance of Bank of America. Once Winery obtained a line of credit from Napa National Bank, however, interest and rent payments resumed. The foregoing facts demonstrate that Vineyards and Winery dealt with each other on terms that were significantly different from those on which they dealt with unrelated parties. Moreover, the record indicates to us that the terms on which they dealt were intended to benefit Winery and imposed burdens on Vineyards. Vineyards executed agreements subordinating its claims against Winery to those of Winery's lenders to induce those lenders to grant credit to Winery. The terms on which Winery purchased grapes from Vineyards were also intended to favor Winery. For instance, in a November 24, 1986, letter to Bank of America, Mr. Groth wrote that "Judy and I have provided generous delayed payment terms to the Winery that are still adequate." Without the generous payment terms granted by Vineyards, Winery could not have purchased the grapes it required without the infusion of additional capital. Winery did not make payments to Vineyards for grape purchases during 1982 and 1983 because funds were not available. Winery began to pay Vineyards after Winery obtained a line of credit during 1984, but payments were subject to the control ofPage: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Next
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